USA and Argentina – Alan Beattie’s Final Response

Since I’m not sure anyone but the two of us is still reading, I’ll keep my remarks as brief as I can. But first of all (and most importantly): I agree entirely that the importance of this analysis is in informing the debate about what Argentina should be doing now and in the future to arrest its relative decline. Yet most of what we have been arguing about belongs to a different era, one of an agrarian society with a dominant landowner class. That world has long gone – although, as I previously noted, Cristina Fernandez still demonises the landowners when it is politically useful.

Whether or not you think the 19th century Argentine elite made bad choices – and in fact it is the 1930s and 1940s when I think the truly bad decisions started – the country is not bound by those events now. Argentina’s main problems over the past couple of decades include fiscal delinquency, political corruption and choking regulation (it ranks 118th on the World Bank’s Doing Business measure, below Nicaragua, Swaziland and Uganda). Those are fixable if the electorate votes for the right people and they then have the courage to implement the right policies. Mistakes that were or were not made a century ago do not have to bind their hands. If Argentina really is trying to find its way to a diversified economy, its agrarian past isn’t stopping it. After a while, path dependence and hysteresis become excuses, not reasons.

Anyway, on the specific points:

– I didn’t say Argentina and the US were identical; I said they were similar. While admittedly less endowed with natural resources, the big surpluses generated by Argentine agriculture towards the end of the nineteenth century should have helped it relax the resource constraint by importing them. Instead, it imported too many consumer goods. I fail to see how Argentina’s agrarian structure prevented it industrialising, particularly since its low labour utilisation meant it wasn’t competing significantly for workers. The fact that the Argentine industrial economy was hedged around with restrictions, monopolies and regulations had a lot more to do with it. And as I said before, the resource argument doesn’t explain the success of Japan, which had coal early on in its industrialisation but soon used it up and largely had to rely on imported inputs.

– On the comparison with the UK: “The structure of incentives is different if you produce food for the internal market as the UK landowners did, and were forced to reconvert because of the pressure of other internal forces”. Nice try, but no. The British nobility started investing significantly in proto-industrial enterprises as early as the 16th century (mining of coal, lead and salt), well before industrialisation had put pressure on their agricultural interests, and continued doing so throughout the Industrial Revolution – despite having no model to follow.

– “The narrative in the article and his two answers, with anthropomorphic constructions such as “Argentina did this” or the “US did that,” evoke the image of all-powerful planners”. Maybe to some readers, but I think it is fairly clear from the context that I am talking about decisions taken collectively through the political process – though in Argentina during the late 19th and early 20th centuries that generally meant a fairly small elite.

– The long section on population I think is making far too much out of quite a simple argument: I was merely rebutting the earlier point that Argentina was physically too small to be a superpower.

– I’ve explained before why Australia is a misleading comparator.

In conclusion, we will indeed have to agree to disagree. Eugenio regards my book as not serious analysis: I regard his critique as the latest in a long, long line of apologias for Argentina which ascribes to bad luck, natural resources or the whims of a capricious world that which should substantially be attributed to its misgovernance.

Countries can effect remarkable transformations in their economic management: in Argentina’s own neighbourhood, Brazil has done so over the past decade and Chile, via a more circuitous route with some missteps, has done so over a longer period. There is no intrinsic reason that Argentina cannot do the same. As I have reported in the FT, several very senior policymakers have told me or my colleagues that they regret inviting Argentina into the Group of 20 because its contributions to the debate do not suggest it is a serious participant in global economic governance. (Less than a decade ago it also defaulted to the World Bank, an action that puts it in the company of Sudan and Zimbabwe.) For a country that used to be one of the ten or so biggest economies on earth, that is an indictment that cannot be explained away by natural endowments or misfortune.

2 Responses to "USA and Argentina – Alan Beattie’s Final Response"

Eugenio Diaz Bonilla September 18, 2009 at 2:20 pm

From Alan Beattie’s story the only thing that can be deducted with certitude is that he intensely dislikes everything that Argentines have done to, with, in or for their country, even referring to issues (such as the G-20 comment) completely irrelevant to our debate.The other certain thing is that he keeps missing the whole point of my argument. For instance he says:“I regard his critique as the latest in a long, long line of apologias for Argentina which ascribes to bad luck, natural resources or the whims of a capricious world that which should substantially be attributed to its misgovernance.”Leaving aside his tendency to use strong adjectives that are not supported by the quality of his arguments, I never said anything that closely resembles his characterization of my position. For the record I quote again what I said in the previous blog:“It is clear that we both agree that Argentina has underperformed her potential, which I find extremely disappointing, and Beattie seems to consider that too. Also, I believe, as Alan Beattie does, that policies matter, and that in the history of Argentina there is much to criticize (I have my share of academic, journalistic, and official pieces with my criticisms of Argentina’s policies at different times, and, of course, I have also written in support of actions I thought appropriate).”With some level of weariness let me restate the two main points of my argument. The differences with him are first, what is the benchmark against which to judge underperformance. This is crucial for dating turning points, and therefore to focus the analysis. He uses the US in isolation which I think is misleading. I utilized the US AND Australia in detail and I also I said in the last blog that “It is far more illuminating to base the analysis on comparisons with Australia or with other Latin American countries.” Now Alan Beattie says that he refuted the use of Australia as benchmark (which he did not), and suggests to use Brazil and Chile (which is the point I made before; by the way I also have charts for Brazil, Chile, and Mexico, constructed as the one for Australia, but it would have been too long to show all of them).The second point is how Alan Beattie treats policies by government and the separate decisions by private actors (two dimensions that he unhelpfully mixes sometimes). My contention is that those public and private decisions must be analyzed considering the feasibility set at the specific historical point in time, the incentives framework at that same point, and the general equilibrium implications. Although now Argentina is “similar” but not “identical” to the US (which does not clarify whether that makes us candidates for the superpower status or not), Beattie does not want to drop the parallelism with the US, and therefore, as I argued, he makes “erroneous inferences” and has to resort to “contrived arguments” when analyzing those public and private decisions. From those two points it follows my conclusion that his story may be considered a provocative journalistic piece, a morality tale, or a motivational speech, but it is not a serious academic analysis.

Guest September 25, 2009 at 1:36 pm

It seems purely vague to compare Argentina to USA. Let me say that after living in Argentina for two years, the superficial smell you get in here is beautiful women (imported from Europe), lots of whore and prostitues in bars, football all day long (soccer for the masses), meat for kilos (asados or barbecues), and some stupid late night shows for entertainment of their population -of course with constant close-up frames of nice boobs & butts to amaze the always horny fantasizing workingman.I don’t see nothing to compare to USA. The middle class lives like hell, in the next 5 years Argentina will suffer curtailment of subsidies to electricity, gas, real-estate taxes, and inflation will probably NOT be resolved, since their primitive mental frame is that of usury, which supports day by day, the increase in prices, altogether with the inheritance of a dolarized economy wich debase the national currency. If you think this is problem of the left or right you are oldfashioned…it is structural, it is cultural, it is a national identity problem.If you experiment the economies yourself, to compare US to Argentina is totally naive, but probably useful if you just see books and believe in USA as the greatest democracy in the world (do not forget the terrorist killing of women and children in Hiroshima and Nagasaki, the use of agent-orange and Napalm in Vietnam against civilians, the killing of civilians in Afghanistan and Pakistan, and the USS Liberty coverup !!).USA economic history and performance is totally different from the one of Argentina, though both hold a stranglehold support from national consumption (over 70% of GDP) this is just demographics and the result of the golden ages of the 1800’s.“It is far more illuminating to base the analysis on comparisons with Australia or with other Latin American countries.” Any kid would agree to this, just a lost in the books US scholar would say otherwise.Didn´t you all and Obama read Galeano’s book?….Well, you all should. Only then, you would understand the meaning of coexistence, of difference and of sovereignty.